While your superannuation is built mostly from compulsory employer contributions, you also have the option to make personal voluntary contributions. This is a great way to put your savings into an investment. Another option is to build your own share portfolio outside of your superannuation.
Both options have advantages and disadvantages, so you will need to consider multiple factors to decide which option is best for you.
According to data from the Australian Securities and Investments Commission (ASIC), about 76% of Australians own a superannuation fund, while only 36% have investments outside of super.
As part of our wealth management philosophy, we highlight the importance of diversified investments. A personal share portfolio and superannuation are essentially both an investment in shares, so which option is best? Should you have both? What do you need to consider?
You can read our full article on why making additional super contributions can benefit you come tax time here.
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All investment avenues have their pros and cons that must be weighed before making a decision. Furthermore, the choice depends on a variety of external and internal factors.
For instance, if you had $10,000 to invest today, we would factor in your dreams and goals, age, risk tolerance and investment structure, and analyse the current performance of markets before making a recommendation. You will also need to take the following into consideration:
Having a combination of shares inside and outside of your super will help to ultimately provide you with more flexibility and security around your finances. This means you take advantage of the benefits from both investments inside and outside of super and reduce the disadvantages at the same time.
However, it’s important to do your research to ensure you choose the right shares to invest in and that you maintain diversification across your share portfolio by investing in a range of different industries and businesses.
We recommend seeking the advice of a professional to assist with reviewing and structuring your investment selection. A financial planner will be able to review your super and also help structure additional investments to ensure your investment selection takes your entire financial position into consideration.
They can also help with recommending the ideal investment strategy for growing your super and the most beneficial amount to salary sacrifice to obtain the full tax benefits.
Risk Vs Reward
In situations where there is market volatility, there are often opportunities that could be taken advantage of; for instance, if shares are at lower prices due to market falls. However, if you are already invested prior to this time you will also need to consider the exposure of your current investments and wealth protection.
Ultimately investing inside and outside of your super can both be beneficial as part of a long-term investment strategy. An adviser will be able to work with you to decide which is more beneficial for you depending on your own unique situation.
Speak with one of our advisers today to discuss which option is right for you.
What you need to know
This information is provided by Invest Blue Limited (ABN 91 100 874 744). The information contained in this article is of general nature only and does not take into account the objectives, financial situation or needs of any particular person. Therefore, before making any decision, you should consider the appropriateness of the advice with regards to those matters and seek personal financial, tax and/or legal advice prior to acting on this information. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relations to products and services provided to you.
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